You’ve seen the hype. Now, let’s look at the facts.
There’s a widely promoted estate and financial planning strategy I’m often asked about. It’s been called the Secret 770 Account and the President’s Account. Other names are Banking on Yourself®, Infinite Banking®, LIRP, and Becoming Your Own Banker®. I’ve also seen it described as The Personal Bank, The Power of Zero, and The Retirement Miracle. Ed Slott, CPA and IRA expert, refers to it as “the single most important benefit in the tax code.”
Many of the promotions say the strategy is confidential, new, revolutionary and, of course, Wall Street’s hidden secret. Also, banks and Wall Street don’t want you to know about it, and only a privileged few of the well-connected have been able to use it, such as presidents, major corporations and the very wealthy.
There’s a tax bill attached to each traditional individual retirement arrangement (IRA) and 401(k), and Congress recently tried to accelerate and increase that tax bill.
That’s why, following enactment of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, many IRA and 401(k) owners need to revamp their estate planning strategies.
As I’ve reported, the SECURE Act ends the Stretch IRA. When an IRA or other retirement plan is inherited, most of the time the beneficiaries must distribute the entire account within 10 years. There are exceptions for a surviving spouse, minor children, a disabled beneficiary and a few others. But in most cases, the ability to make the tax deferral of an inherited account last more than 10 years is eliminated.
Read more: Bob Carlson's - Two Strategies That Beat the SECURE Act
Most Americans know the legacy they want to leave, but few take even the minimal steps to ensure that legacy. A legacy is what you leave behind, especially to heirs and loved ones. A legacy can include things, such as money, property and other tangible items. Some of these items might have monetary value while others have mostly emotional value.
A legacy also can include the intangible, such as values, life lessons and final wishes and instructions. Americans ages 55 and older generally agree on the legacies they want to leave.
Read more: Bob Carlson's - Protect Your Legacy by Taking the Steps Most People Don’t
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Read more: Bob Carlson's - My 2021 Strategy for the Long-Term Care (LTC) Crisis
We’re nearing a critical time for many Individual Retirement Account (IRA) owners. Advance IRA planning will be imperative if you want to maximize the after-tax value of your IRA for heirs and avoid the new tax burden Congress has in mind.
As I explained last month, despite the deadlock and division in Washington, the Setting Every Community Up for Retirement Enhancement (SECURE) act moved through the House of Representatives by a vote of 417 to 3 in May. A version of it is likely to pass the Senate and become law later this year. The SECURE Act and its Senate counterpart have a number of provisions designed to expand retirement savings opportunities and would delay required minimum distributions (RMDs).
To make up for the lost tax revenue, the SECURE Act and the Senate version would end the Stretch IRA. The Stretch IRA is a strategy in which children who inherit an IRA make maximum use of the tax code to minimize distributions for years. In many cases, the RMDs are less than the investment return of the IRA, so the IRA not only lasts for decades but increases in value. Under the SECURE Act, beneficiaries (other than minor children and a few other exceptions) would have to distribute and pay taxes on an inherited IRA within 10 years, even Roth IRAs.
Read more: Bob Carlson's - Congress Plans to Kill the Stretch IRA, But You Can Do An End-Around